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April 23, 2010

Small Business Health Care Tax Credit

The small business health care tax credit takes effect this year. It is designed to encourage small employers to offer health insurance for the first time for their employees or to maintain coverage they already have been providing. The credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010.

For tax years 2010 - 2013 the maximum credit is 35% of premiums paid by eligible small business employers. This credit is available to employers with 10 or fewer full time equivalent employees paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 full time equivalent employees or more or that pay average wages of $50,000 per year or more. Since the eligibility rules are based on the number of full time equivalent employees, businesses that use part-time help may qualify even if they employ more than 25 people.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return that is filed in 2011.